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Zorluk: OrtaMonetary Policy Framework, RBI Mechanisms, Banking System, and Financial Markets

Arrange the following Reserve Bank of India (RBI) money supply measures (monetary aggregates) in descending order of their operational liquidity, starting from the most liquid to the least liquid:

  1. 1M1M_1 (Currency with the public + Demand deposits with the banking system + 'Other' deposits with RBI)
  2. 2M2M_2 (M1M_1 + Savings deposits with Post Office savings banks)
  3. 3M3M_3 (M1M_1 + Time deposits with the banking system)
  4. 4M4M_4 (M3M_3 + Total deposits with Post Office Savings Organisation, excluding National Savings Certificates)

Cevap

The correct descending order of liquidity among monetary aggregates is M1M_1, followed by M2M_2, then M3M_3, and finally M4M_4.
Liquidity measures how quickly an asset can be converted into a medium of exchange without loss of value. M1M_1 is the most liquid (cash and demand deposits). M2M_2 comes next as post office savings are liquid savings accounts. M3M_3 is third due to time deposits with fixed maturity. M4M_4 is the least liquid as it encompasses all broad money components and total post office deposits.

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1
Determine the liquidity level of M1M_1.
M1M_1 consists of physical currency in circulation and liquid demand deposits, representing 100% immediate transaction liquidity.
Demand deposits and cash can be spent directly without any conversion delay or financial penalty.
2
Compare the relative liquidity of M2M_2 and M3M_3.
M2M_2 adds post office savings deposits to M1M_1, whereas M3M_3 includes commercial bank time (fixed) deposits. Because fixed deposits carry lock-in tenures and early withdrawal penalties, M3M_3 is less liquid than M2M_2.
Time deposits cannot serve directly as a medium of exchange without liquidating the fixed deposit contract.
3
Evaluate the liquidity of M4M_4.
M4M_4 expands upon M3M_3 by adding long-term post office savings instruments, placing it at the bottom of the liquidity spectrum.
M4M_4 includes the largest volume of non-transactional savings deposits with longer lock-in periods.

Anahtar Kavram

Liquidity Hierarchy of Money Supply Aggregates (M1,M2,M3,M4M_1, M_2, M_3, M_4)
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Konular

Monetary Policy Framework, RBI Mechanisms, Banking System, and Financial Markets